Money Information

Debt and money advice problems occur for varying reasons, but whatever the reason, getting the right money and debt help is vital. There are options which can help a person avoid the most severe debt solution, bankruptcy. Yet, for some people, depending on their situation, bankruptcy could allow for the perfect restart and restore financial parity.

You may not have debt problems but instead need money advice. There are various reasons why this would be the case, perhaps the money worries are not severe enough to warrant a solution. Some people want to remortgage to deal with debt or just worry that they need help to write a will for their loved ones.

In some cases moving property can resolve any money problems and in that instance it’s best to speak with someone like Perth estate agents.

Debt Problems

Society suggests credit is good, but debt is bad. The two actually work hand in hand. A mortgage is considered, good credit. It’s a loan that enables a person to buy their property and repay the loan over a period of time, usually 25 years.

However, a credit card can be considered as good debt too. If the credit card is used to pay for shopping, bills and day to day expenses, but the credit card is repaid every month, in full, then it’s improving a person’s credit score. Our society demands people to have a high credit score in order to get the best mortgage advice, lowest interest rate credit cards and best financial deals. To show that we are credit worthy, we must borrow and repay on time.

However, problems occur when an over reliance on credit develops. Being given a credit card with a £3,000 limit may seem like a windfall, but this money must be repaid. The minimum repayment to a credit card is a percentage of the money borrowed. This payment must be met every month so that the account does not default. A default would mean the contract you agreed to was not met and the credit card company would be able to put a black mark (known as the default) against your credit file. This would affect your credit score.

Debt problems can happen for many reasons. What’s for certain is nobody wants to end up in debt – it just happens. The most common reason for debt problems is an over reliance on credit. I have it, so I’ll use it. We become accustomed to borrowing on a card to buy the shoes, clothes, holiday or home repairs we want. The repayment is simply a monthly payment over a period of time we accept. For example, we borrow £10,000 and repay £300 per month to the debt. By continuing to borrow on top of debt the total repayments grow until the repayment each month outweighs the amount a person can afford to pay.

The second most common reason for debt is because of a person’s unemployment. In the same example as above, if you’ve borrowed £10,000 and have to repay £300 per month, what would happen if you lost your job? It would become impossible to repay the £300. This then causes a “borrow from Peter to repay Paul situation”. The debt doesn’t go away, it’s just being moved from one company to the next.

The next most common reason for debt is reduced income. This can be for anything from a reduction in contracted hours at work, through to the loss of a partner. People dying can mean income is reduced. That’s why getting life insurance is important. It’s sometimes considered a luxury to buy life insurance, especially when there are debt problems, but it’s the future of the family that must be considered first and foremost.

The loss of a partner can mean death, but in today’s social climate, it can also mean divorce or separation. Splitting up from a partner means the two incomes become one, while the cost of living is now managed by one single person. There’s an economy of scale living with another person – the bills are split – so when the separation happens it can hit the bank balance. If there are already existing financial advice problems then it’ll only get worse. 75% of couples argue about financial problems and it’s for this reason many people feel detached from their partner and divorce or separation because of debt occurs.

Financial Services: Balance Transfers

Before seeking debt help, people typically balance transfer their debt. The credit card which offered 0% interest for 15 months has ended and the repayments monthly have increased.

“Right”, they say. “It’s time to balance transfer this debt”.

The balance transfer is a great marketing tactic for financial institutions to lend money to indebted individual’s and help them keep the cycle of debt going. The only problem is, nobody wants to be the credit card company left with the debt when there’s finally no other option.

Eventually, after several balance transfers, there will be no other company willing to offer a balance transfer. The balance transfer is an introductory promotion so a person cannot go back and ask for the same rate again. From time to time there may be an offer to move back to an old credit card company to get the best rate again, but in the main, most credit card companies will know when a person is financially in trouble.

The balance transfer would move the debt from one company to the next and help to buy time. As long as the debt was reducing, the balance transfer could be considered a great idea! If the debt was not declining then there would be a reason for concern.

Getting into a financial predicament is easy to achieve. It can seem like a great idea to borrow money and repay it back later, but when other factors take over, the money concerns grow.

It’s not long until a stable financial position can grow into a disastrous problem. The priority expenditure must always be paid – no matter what! That means rent or a mortgage, council tax, gas and electricity and food are all imperative for survival. Many people think council tax is not an important expenditure and can be avoided, but it can’t. Council tax debt problems result in bailiffs at the door and the threat of legal action. It’s for this reason people must considered the debt solutions which are available to them.

The right debt solution will give a person the opportunity to pay what they can afford to their debt. In many debt solutions interest and charges are frozen and it means they are protected from their creditors.

Debt advice is available from companies, who may charge, as well as free charities. Debt help can be offered through the telephone, internet or face to face. The most important element is getting the right help. Make sure anybody providing debt advice and debt solutions has the necessary qualifications.

Debt Solutions

There are lots of debt solutions. These solutions vary in support and protection from creditors. The amount you repay is dependent on your financial situation – you pay what you can afford. Each debt solution is designed with a person’s financial predicament in mind and will help some people more than others.

You may have heard about some of these debt solution on the web, in financial news or through friends, but few know whether they are suitable for the solutions.

The debt solutions available in the UK are split into England, Wales and Northern Ireland and Scotland. The Scottish law is different so there are alternative solutions.

For people with low amounts of debt (less than £3,000) they should think about token payments towards their debt. The token payment option is as low as £1 per week towards the debt and is generally for people who are unemployed and can’t afford their debt. Most people expecting to regain employment won’t want to enter bankruptcy, instead the token payment plan is best. If a person has low amounts of debt, but they are not expected to regain employment, then they may consider a debt relief order to resolve the debt problem.

England, Wales and Northern Ireland

The debt solutions available to people living in England, Wales and Northern Ireland are

Debt Management: The debt management plan helps a person pay one amount to their creditors over a longer period of time. The debt plan lasts until all the debt is repaid and in some cases, interest and charges can be frozen.

IVA: The Individual Voluntary Arrangement is a debt solution to protect people from their creditors. By entering an IVA debt solution, a person can repay an affordable contribution to their debt every month, usually for 5 years. The rest of the debt is written off legally at the end of the IVA.

Bankruptcy: There are three routes to bankruptcy; creditor forced, court petition and DRO (Debt Relief Order). The first is when a creditor goes to court to make you bankrupt. The second is when you petition to court for your own bankruptcy. The third is the DRO. This is for people with less than £15,000 unsecured debt (credit cards, personal loans etc), people who don’t own a house and have less than £50 left at the end of the month to pay towards debts.

Before you enter any debt solution, get professional debt advice from a free charity. This website does not offer debt help but is simply for information purposes only.

Scottish Debt Solutions

The debt solutions available to people living in Scotland are

Debt arrangement scheme: The DAS provides a person with the opportunity to repay all their debt over a longer than usual period of time. Interest and charges are guaranteed to be frozen.

Protected Trust Deed: The Trust Deed is a signed document which protects a person from their creditors. The creditors cannot take any action once a person has entered a Trust Deed. The Trust Deed will last, usually, for 48 months. Any debt which is not repaid will be written off at the end of the Trust Deed.

Bankruptcy: In Scotland, there are various routes to enter bankruptcy, including the LILA and Certificate of Sequestration. The LILA is for people who earn less than £247.50 per week (gross). The Certificate of Sequestration is for people who want to make themselves bankrupt, but don’t qualify for LILA.